The fear trade

By John Spence

Investor jitters over the spread of a deadly swine flu were evident in ETF trading on Monday.

ETFs tracking the Mexican stock market and currency were hit hard as traders reacted to news that the number of deaths in the country from the outbreak has topped 100.

The MSCI Mexico Investable Market Index Fund (EWW), a basket of Mexican large-cap stocks, was down about 7% in midday trading. It was among the largest percentage decliners in ETFs on Monday as the swine flu outbreak dominated headlines around the globe.

From a sector standpoint, airline ETFs absorbed the most damage on Monday on fears the flu could lead to a slowdown in air travel. The Claymore/NYSE Arca Airline ETF (FAA) shed nearly 10% at last check on Monday. It was the biggest loser among ETFs. Read more on airline stocks.

However, health-care stocks moved higher on potential sales of drugs to fight the outbreak. The SPDR S&P International Health Care Sector ETF (IRY) gained about 5%.